Marcellus / Regulatory / Utica / Shale Daily / NGI The Weekly Gas Market Report / NGI All News Access

Pennsylvania NatGas Severance Tax Debate All Talk, No Action

Pennsylvania’s latest piece of natural gas severance tax legislation made it to the Republican-controlled House floor for two days of debate that ended on Tuesday, with the chamber adjourning until Dec. 4 and no more clarity on the bill’s fate.

The legislation is certainly fatter than it was when it reached the floor. Debate mostly surrounded a series of amendments that were tacked on. Members discussed how the new revenue would be allocated and how proposals such as faster permitting turnaround times, even though industry representatives have said they’re not inclined to pay more taxes for speedier permits.

Dozens of amendments were left on the table without time to debate them, but it remained unclear Wednesday if the legislation, HB 1401, would come up again after the holiday break.

The bill as proposed would impose a 3.2% severance tax on the value of natural gas produced by shale drillers and keep in place the impact fee, which is levied annually on most unconventional wells in the state for distribution to local communities and state agencies. It would raise an estimated $100 million at current prices.

The bill was introduced earlier this year. Republican House leaders staunchly opposed efforts to pass a severance tax during a four-month budget impasse that ended in October. The GOP-controlled Senate passed a revenue package over the summer as part of budget negotiations that included a proposal to tax shale gas producers 2 cents/Mcf and possibly more after that. The House shut the proposal down.

Democratic Gov. Tom Wolf has proposed a severance tax three times since taking office in 2015, and HB 1401 would raise less than his last 6.5% proposal. A severance tax, however, has been a popular proposition in statewide polls. Wolf is up for reelection next year and the issue is again likely to play a prominent role, especially as House Speaker Mike Turzai has entered the race for the Republican nomination.

Turzai has been a staunch ally of the natural gas industry, leading some pundits to speculate that the House debate on Monday and Tuesday was purely political and aimed at demonstrating that Republicans remain committed to at least exploring more ways to generate additional revenue as the state has consistently faced budget deficits in recent years.

Lawmakers have tried but failed for years to reach a compromise about the severance tax. Proposals have come close in the past, but legislation has stalled in one chamber after passing another or been widely defeated.

Recent Articles by Jamison Cocklin